The Mortgage Broker vs. Mortgage Banker Argument

Several people have asked me to comment on the differences between mortgage brokers and mortgage bankers and levy an opinion on which I believe to be the better business model. I am, of course, weighing in on what I believe the best model to deliver service and a solid loan to a consumer, and will ignore owner-related issues such as profit margins as they do not relate to the overall customer experience. This is not meant to be a deep introspection of the two models; rather, consider it a survey of some of the important differences between the two and their implications on customers interacting with each.

If you’re wondering why I may be able to speak to this argument with any rigor it is due to the fact that the company I own has operated under both the mortgage broker and mortgage banker business models. As the champion of our switch from brokering to banking, and the change agent involved in the transition, I have a first hand knowledge of all aspects of the differences between the two models. With this understanding I believe I can candidly discuss the pros and cons of both models; and what the implications of each are for the customer.

For those of you with limited time or attention, I’ll share my conclusion with you here. With anything complicated the answer is “it depends,” and here is the distillation of the below: if you are unconcerned about loan-product selection and you are a very vanilla-type borrower then I would suggest choosing the mortgage banker. If you are concerned about a wide selection or you have a difficult financial or credit history I would suggest choosing the mortgage broker. With one caveat, I would always suggest the mortgage broker over the small mortgage bank.

The Broker ArgumentThe broker argument is often surmised as follows. The broker has a wide range of bank partners and loan options, making it easy for brokers to find and place the best loan for a customer in terms of price, rate and terms of the loan. The argument continues, not incidentally, that people with difficult-to-document situations can be served by this wide network of lending partners. Brokers will also excitedly share with you the discount you receive by receiving “wholesale” rates that are below the market that banks offer. The reasoning is that because the broker is responsible for overhead they receive a reduced rate from the bank – which they are graciously passing on to you, the customer.

An Argument against BrokersOften, you’ll hear someone who works for a bank or a mortgage banker tell you that working with a mortgage broker is bad news with the following pitch. A broker is an independent third party, with zero decision-making ability; they don’t approve your loan and have to wait in line with all other mortgage brokers while they wait for a decision from the underwriting department. Further, when you have a middleman you pay for that extra party involved. They have expenses that they need to cover by fees charged up front on a loan; which means higher upfront charges to you.

The Banker ArgumentThe banker argument sounds a bit like this. By working with a direct lender you have eliminated and expensive middleman who has zero decision-making ability. You have decided to come straight to the source; and because we lend our own money we are able to make underwriting decisions, gain special exceptions, and process your loan much faster at a much lower cost to you. Everything is done in-house, there is no waiting inline, no false promises – I can give you a fully underwritten approval from right down the hall. A mortgage broker can’t really tell you what you’re approved for until they hear back from the bank, which can be weeks. Why put yourself through that when I can tell you right now whether you’re approved or not? And remember, we are a financial institution, a direct lender, not just a fly-by-night broker who you are not sure is going to be there tomorrow.

An Argument against BankersOften, when a broker is competing against a banker they’ll use some derivative of the following argument. Mortgage bankers are exceptionally limited in the products that they are able to offer. They make their money by producing volume in limited product categories; in addition they don’t have the opportunity to shop for the true best deal for you. You only get to choose from what they offer, and depending on their specialty, those rates and programs could be far from the market value. You also don’t see how much money they truly make on your loan. They could be making thousands of dollars in additional hidden profit by giving you a higher interest rate than you deserve. Further, many small mortgage banks are nothing more than brokers on steroids. Since they sell your loan immediately they don’t always have ultimate control like they say they do. Finally, your loan will be sold immediately. This means that you may be confused about whom to make your payment to, and will have to deal with the headaches of your lender changing almost as soon as the ink dries on your loan documents.

Common Misconceptions about BrokersWith anything confusing people attempt to simplify the story to make it easier to understand. We are far better at remembering and making sense out of stories than we are at remembering and processing lists of facts and figures. That’s why people tell stories and don’t rattle off bulleted lists. The problem with the way we process information and remember stories however; is that we tend to over-simplify to make the story cleaner and easier to tell and remember. For most things the result is negligible, and the simplification suits us well; for others this tendency can be damaging. Such is the case in a complex comparison between brokers and bankers. By distilling to simple comparisons we fall victims to the lack of focus on key distinctions and facts.

Here are some common misconceptions about brokers, and a humble rebuttal.

Brokers don’t have to be licensedThis is patently wrong (mostly, depending on the state). Brokers are governed by state licensing institutions and therefore require licenses to operate. Federally chartered banks are not subject to state licensing requirements and therefore do not need to have their employees licensed under the state regulations in the jurisdictions where they operate. The efficacy of licensing is a debate for another time; but suffice to say, according to (most) state laws brokers of residential home loans need a license.

Brokers have no decision making powerThis is wrong as well. While this myth is most likely perpetuated from the past, brokers have many of the same tools as the mortgage banks in terms of underwriting and qualifying a borrower for a home loan, on the spot. Brokers have access to the same Automated Underwriting Systems (AUS) that most mortgage bankers do. This allows brokers to obtain instant approvals in-house with out needing to ship the file off to the bank for approval. Once an AUS approve is obtained, the bank simply verifies the documentation supports the information uploaded in to the AUS; they do not re-underwrite the loan, and they do not review the decision (except as noted).

This means that an approval from a broker is as solid as the one from the bank. In fact, the mortgage bank is going to do the exact same thing. Where this myth holds is in the offices of the “old school” brokers who refuse to run files through AUS prior to submitting files to the bank. By avoiding this recent technological advance the broker is putting you in line with others; and then truly has no decision making ability. Some times, if you are a subprime borrower or have a unique lending circumstance, brokers may not be able to issue an AUS approval, and then your file will need a complete underwrite at the bank your loan is destined.

Brokers are financially unstable Bankers love to portray all mortgage brokers as fly-by-night operations that don’t have the capitalization or the stability to be a direct lender. This is certainly true in some cases. Some people who obtain a brokers license choose to practice their craft on a part-time basis, others are truly the fly-by-night variety, in the industry for a quick buck and then gone the moment things get tough; however, there are some brokers that are well established, have a longer track record of success than a mortgage banker, are better capitalized and have made a choice to stay a broker.

Brokers are a rip-off There seems to be an American quality that drives us to “eliminate the middle man,” perhaps it’s been the successful marketing over the years of direct-to-consumer efforts of other industries. We love Costco, we love discount “wholesalers” we loathe paying markups and dealing with middlemen. In the case of mortgage brokers some are certainly rip-offs. The fact remains however that anyone issuing credit to you in the form of a home loan can rip you off. Bankers can certainly charge excessive fees with the best of under-handed brokers. Loan officers at banks and loan officers in a brokerage all have varying moral compasses and the institution they work for has little to do with their current direction.

Here are some common misconceptions about mortgage bankers; again with a rebuttal:

Bankers charge more on loans – you just don’t know itSome brokers argue that because mortgage bankers are not required by law (like brokers are) to disclose the compensation paid to them for selling premium interest rates, bankers are able to dupe the customer in to a higher interest rate to reap additional hidden profit. While it is true that bankers do not need to disclose that hidden profit (known as yield spread premium, see link for in-depth explanation) most are unable to maximize that hidden profit because to do so would price them out of the competitive interest rate market. Hidden profit cannot be made unless there are higher interest rates charged to the customer. Unless the customer is blindly accepting the rate on good faith, they should be able to quickly surmise that the rate offered is way out of line with even a superficial comparison shopping effort.

This competitive environment often limits this ability to hide profit from customers from turning in to a “rip off.”

Bankers are limited to only one of two programsI’ve heard the silly argument that bankers are bad for consumers because they only offer say, product A or B, and if product A or B isn’t ideal for the customer the mortgage banker still steers them in to one regardless better options “out there.” While bankers do customarily have fewer bank relationships than brokers, this does not necessarily mean they are more limited in the mortgage products they can offer. Take for instance a mortgage banker that sells to Countrywide. This banker may have in excess of 150 different loan products running the full spectrum of financing options.

Additionally, mortgage bankers may be allowed (based on the business rules established in the institution) to take loans that don’t “fit” their banking guidelines through the broker channel and act in a limited broker capacity; that is they can farm your loan out if it doesn’t fit internal guidelines. As I said, their ability to do that is really dependent upon the institution they work for.

Bankers have better ratesSome people mistakenly believe that bankers have lower rates than brokers. It probably stems from the “eliminate the middleman” pitch that we discussed above. This myth is just that, a myth. Rates are based upon the rate available to the bank for the particular loan program PLUS the markup charged by the banker to cover their expenses and add to the bottom line. This markup is hidden from you, the borrower, and often from the employees – definitely the sales team. Brokers must disclose all rate markups. This doesn’t imply that banker rates are higher than broker rates, but it does suggest that regardless of business model their will be fluctuations based on decisions made at each individual business.

Some pros and cons of working with a broker

Pros

Low overhead can lead to lower rates

Wide range of products from diverse lending sources

Can source many different financing options

Must disclose all compensation associated with loan

Cons

Necessary middleman

Sometimes limited decision making ability

Can be ephemeral, lower barrier to entry for business owners

Some pros and cons of working with a mortgage banker

Pros

On-site decision making ability, more control over the process

Better rates for larger banks (volume discounting)

Cons

Don’t disclose yield spread premium profit

May charge additional fees to support overhead (underwriting, etc.)

May not have true decision making ability

Why I don’t like small mortgage banksI said earlier that if you had to choose between a broker and a small mortgage banker to always go with the broker. Here’s why I believe that.

Decision Making AbilityTo make a decision on a loan you need an underwriter to sign off on the loan and a funder to coordinate the funding by ensuring the final documents are in place that make the loan “sellable.” When those two positions are properly performing their job functions you have in-house decision making ability on loan approval and funding. The problem with small mortgage banks is that they may not have underwriting and funding in-house. This takes the decision making ability right back out of the hands of the small mortgage bank; making them no better than a mortgage broker on steroids.

Small mortgage banks may not have underwriting and funding in-house due to the high expense associated with the positions. Underwriters are not cheap, and while funders are relatively inexpensive it is a fixed cost that some smaller operations choose to not incur. So if you are working with a small mortgage bank they may have a contract underwriter or a part-time underwriter or use an underwriting service to approve the loans they plan on writing. This invalidates their argument of having centrally-based decision making ability because they are sending their loan files off to another source outside of their organization for someone else to underwrite and make the decision. This is exactly what brokers do.

To exacerbate that problem, smaller mortgage banks often require prior approval from either their warehouse line or end investor (the bank ultimately buying the loan) or both. This means that not only does the small mortgage bank have to underwrite the loan (by sending it out?) but they also need to receive approval from their warehouse credit facility to lend the money and they may even need the investor’s prior approval to buy the loan before they are willing or able to fund the loan.

So hopefully you can see the added complexity that can bog down your loan when you use a small mortgage bank. Instead of one approval, they may need up to 3 approvals before your loan is truly approved and ready to go. Most of these problems are alleviated when you use a larger mortgage banker who has in-house, delegated underwriting authority. The question to ask when someone tells you they are a direct lender is “Do you have in-house underwriting?” and “Do you have delegated approval authority from your investor?” If the answers are yes to both of these questions then you are in pretty good shape; if not the service provider is going through extra hoops to approve your loan for funding.

CostsAs I mentioned above underwriters and funders are not cheap, and they are fixed costs for a mortgage bank; costs that aren’t there for mortgage brokers. There are other costs for mortgage bankers that are not associated with brokers – warehouse interest fees, document preparation fees, fees associated with the loan sale and transfer, and of course the added salaries of the people involved in the process.

These costs need to be recouped by small mortgage banks, and they often do it either by adding hidden profit in to the loans in the form of inflated interest rates, or by charging additional fees on the closing statement to recoup the costs of mortgage banking business. For a smaller mortgage bank that doesn’t do a lot of volume the need to recoup costs may be much higher on a per loan basis than a larger mortgage bank. Again these costs are non-existent for a mortgage broker.

You can see that a large mortgage banker, who operates on volume and therefore only needs to recoup a small portion of expenses on each funded loan; and a mortgage broker who doesn’t have the associated costs with their business model, may be less expensive than the smaller mortgage bank.

Higher Interest RatesContinuing with the above, the need to recoup costs while profiting in a higher-overhead environment can often times manifest itself in interest rate mark ups. That is, the mortgage banker is not required to disclose yield spread premium profit on each loan. They therefore are able to mark up the rates offered to them by investors in secret, before delivering them to the sales staff so that there is a fixed profit margin on each interest rate quoted. This is often profit for the house and not known by the sales staff. In order to achieve this profit though there needs to be a spread between the interest rate offered by the investor and the interest rate charged to the customer by the mortgage banker. This can be anywhere from a few percentage points to a quarter or half-again higher interest rate.

This is exacerbated in smaller institutions because of the pressure to increase margins on each unit funded because of the overhead expense associated with banking. Larger institutions can make smaller profit on each individual unit; relying on volume to make up the difference.

In ConclusionThe banker/broker argument is a bit overblown. It is often used as a sales tool and the benefits of each are usually espoused the strongest based on the seller's current business model. Bankers push banking and brokers push brokering. As both a banker and a broker (a small banker, btw) I think that both models are efficient and have pros and cons that offset one another and are often overblown. I think that consumers, real estate professionals and other interacting with the lending community should not base their decisions on the business model chosen by the financing source (broker or banker) but rather on the individual merits of the people and institution. Regardless of model, I would look for people that tell the full story and look out for the best interests of the borrower as tantamount to any of the concerns above. Bankers and brokers both can be excellent sources of financing and lousy sources of financing. It’s up to the borrower to and business partner to choose their financing source based on service, honesty, integrity and follow through; more so than rate, cost or business model.

That's a very balanced (and long) comparison and contrast of bankers and brokers. Frankly, I don't think I have ever read one piece with so much on both sides. Both models work well and both have limitations. A small banker who is unafraid (and undeterred by owners) to broker can sometimes enjoy the benefits of both sides.

I quickly scanned the pro/con bullet points and to be honest, it looks like you were biased towards the broker versus banker, when putting it together.

Regarding overhead, unless you are talking about one of the large national lenders such as a Countrywide, I don't see where this becomes an advantage for the broker. For example, even if a mortgage banker hires an in-house underwriter, the banker can now charge the customer for an underwriting fee to cover it, whereas with the broker, the lender will now get the underwriting fee.

You listed wide range of products from diverse lending sources and then made another point of can source many different financing options. Sounds like one point you stretched into two and you left the ability of the banker to offer a wide range of products off their pro list altogether.

I am completely baffled why you put - Must disclose all compensation associated with loan. This is wrong because many don't list all their compensation on the GFE and often it doesn't show up even on the HUD-1 either. And this has been proven countless times. In fact, the deceptive use of the YSP should be highlighted in flashing neon letters as one of the major cons against using a broker but you let it slide for some reason and actually made it into a plus for them.

The Cons used were equally diluted when you used the term "necessary" middleman. The term "necessary" implies this is something that is needed which would be a positive. It would have been more appropriate to state "unneccesary" if you were describing something that was a con.

I also can't figure out why you say "Sometimes limited decision making ability." If a broker is never responsible for underwriting and approving the loan, then the decision making ability they have is always limited.

I had to look up "ephemeral" (who else knew what it meant?) but the last con point I think is major because entry requirements into this business are so low, that it breeds an enormous number of individuals who are uneducated, inexperienced and often unethical - many who are not in it for the long haul. Making the step up to mortgage banker entails more financial requirements and scrutiny which likely would eliminate many at the lower end of the totem pole.

Switching over to the mortgage banker pros and cons, you could only come up with 2 pro points but 4 cons which stood out like a sore thumb. You did ,however, finally get in yield spread premium and decided to dump this on the banker but no mention of it in regards to the broker side. Still shaking my head on this one.

While I'm guessing you wanted to present a balanced comparison and in a way not to assault either side, I think you downplayed some important differences both pro and con, and failed to mention other major items all together.

I will also acknowledge there are both good and bad mortgage brokers/mortgage bankers out there but unfortunately, this comparison does little to spell out the true facts of the matter. Maybe some of the staunch supporters for their side can join the discussion and get this going.

Morgan, I really enjoyed your post. By the way it was not to long.. It was really well put together and you really in my opinion showed both sides. This to me was the best "It's up to the borrower to and business partner to choose their financing source based on service, honesty, integrity and follow through; more so than rate, cost or business model."

Came back expecting a number of other posts taking a position but guess most are scrambling to survive and don't have time for this.

I did review the original post in more detail and believe I was spot on with my original position, except I just wasn't harsh enough.

I also disagree with the last poster who thought the best part was "It's up to the borrower to and business partner to choose their financing source based on service, honesty, integrity and follow through; more so than rate, cost or business model."

What? I love it how rates and costs get downplayed in this business. Oh yeah, it's so much more important to find someone who is honest, has integrity and will provide you with service and follow through. Let me tell you, these are traits that should be inherent in any business and not elevated as something you will only get if you are lucky enough to find the right provider.

Hey folks - getting someone a loan isn't brain surgery or rocket science. Someone who is barely literate can make a killing in the right market doing home loans. Since when did this become a professional and prestigious occupation that warrants six figure incomes matching and exceeding those who spent the time and money to get a formal education and then still had to gain the working experience before they saw the fruits of their labor.

The day is coming and hopefully sooner than later, when the public finally understands what a royal screwing they have been getting from their local mortgage broker/banker/national lender. If there are 5% of you who are BOTH honest and FAIR with your rates and fees I would be surprised. Unfortunately, I think that figure could likely be cut in half or even less. Anyone want to defend their noble position? Probably not, because you know I am right.

Any long comment that starts out "I quickly scanned" naturally gets little response. If you don't take the time to read the entire argument the comment has little merit.

I am currently on a 2 week vacation with my family (not scrambling) and therefore have limited internet access and/or desire to be on the computer however - here are my rejoinding arguments to Jim.

The last sentence of "It's up to the borrower to and business partner to choose their financing source based on service, honesty, integrity and follow through; more so than rate, cost or business model."

Was meant to show that the business model argument is not the most important aspect when choosing financing for your home. It has more to do with the person you are working with. The argument that low rates and expenses get downplayed is a valid one. On the flip side, people chasing after imaginary rates at imaginary costs are those most often burned by the scum of the industry. By going for a pie-in-the-sky rate you pre-select yourself to work with the person who is happy to lie to you to get your business.

Honest originators seem less competitive because they are honest. You should always be looking for a fair deal but you shouldn't make your decision based solely on costs. Do you chose the cheapest doctor, lawyer, accountant, hair dresser, restaurant, hotel, brake repair service, car model, television, cable service? I hope not - if you are you're missing out and worse are taking some dangerous risks. The same goes for the mortgage industry - choosing cheap is not the right answer. Choosing fair + good value is. It's not rocket science to cut hair either - but you can tell the difference between a $6 and $20 hair cut; maybe not between a $20 and a $400 hair cut but you do get what you pay for.

You are right there is a lack of honest operators in this industry - because the dishonest ones are rewarded time and time again for their lack of scruples by people who really think they are getting a 1% 30-year fixed - following the strategy of going for the "best deal" and "lowest cost".

My original opinion was that either model is fine, the argument is overblown and that in the end you need to assure yourself that you are working with someone who has your best interest in mind, not someone who will pump you full of false promises only to reneg at the last minute.

"It's not rocket science to cut hair either - but you can tell the difference between a $6 and $20 hair cut; maybe not between a $20 and a $400 hair cut but you do get what you pay for."

Both a bad analogy and assertion on your part, comparing the price for a haircut and saying you get what you pay for. To begin with, to be a really good barber takes a hell of a lot more training and skill than someone who sells home loans. Barbers also have to depend on repeat business and if they don't provide a good service the customer doesn't come back and they are eventually out of business.

Sure there is a select few that don't mind paying $400 for a haircut and it is probably for the prestige factor more than anything else. But, I think as you already admitted, someone could get the same quality haircut for probably $20. That's the POINT and why you are wrong with "you do get what you pay for."

The majority of barbers are honest and hard working, charging the $20 fee they deserve to get, whereas in the mortgage business, most are trying to get the $400 fee or somewhere in between, which is nothing more than a consumer ripoff.

Could you tell me exactly what is it you do that warrants charging thousands of dollars for something that is not that complicated to do? Since I know how this game works, I'm really curious to hear your answer.

A very lucid and well thought-out piece. I have been both a banker and a broker. I think the thing the customer needs to be the most concerned about is the loan officer. Obviously, a well-educated, well-trained, honest and hard-working loan officer has the most bearing on the process. A dishonest, lying idiot will screw it up regardless of being a banker or a broker.

Well I have to disagree with you that it is a bad analogy and assertion. Your personal opinion that it takes more training and skill to be a good barber than to do a good job finding financing options for homeowners is just that - your personal opinion. I completely disagree. But, I am not going to change your mind on that end.

"The majority of barbers are honest and hard working, charging the $20 fee they deserve to get, whereas in the mortgage business, most are trying to get the $400 fee or somewhere in between, which is nothing more than a consumer ripoff. "

This statement is unfounded. What study are you citing that shows the majority of barbers are honest and hard working? Or are you simply saying that because $20 is less than $400? Who says barbers don't just churn out as many haircuts as they can per hour to maximize their personal gain? What if my personal opinion is that most hair dressers or barbers don't listen to you, don't pay attention to your requests, and generally give lousy service? Should I take that to be fact and hold my experiences against the entire barbering profession? If you want to just throw your opinions around as fact on the large scale, we're not going to get very far.

Second - the dollar amount collected for the transaction has nothing to do with honesty or hard work or "what they deserve." The market for their services sets their level of compensation. Nothing else. If people thought getting a hair cut was a life or death procedure they'd pay a lot more for one; unfortunately for barbers they don't and therefore pay very little (on average). Getting what they deserve has nothing to do with it. What is this level of compensation "what they deserve?" Do you have personal payment levels for different service types that are "deserved" or not?

There are a lot of hard working and honest baseball players pulling down millions a year (and some that are not honest as well) is it a consumer rip off then, just because of the dollar amount earned? Further there are honest and hard working loan agents who have spent years writing good loans. Your argument holds little water.

Finally, while I do not consider home financing a "game" the costs associated with it are commiserate with financial transactions of similar nature. Stock brokering, insurance, banking, real estate, all have similar (or larger) commission structures. Unless you deride all people that make money from these types of transactions, then I can't argue with you. Are there rip-off artists? ABSOLUTELY. There are in any industry. Does mortgage have more than its fair share - ABSOLUTELY. Should buyer beware - 100%. But the dollar amount earned has nothing to do with being a rip off or more "than they deserve." By the way - what would you think someone handling close to 250,000 - 500,000+ dollars per transaction should be paid? I want someone who is vested enough in my transaction to make sure it is done right and properly and in my best interests. And if I choose the cheapest, pie-in-the-sky offer from the guy sitting at a card table in a garage promising me the world well then buyer beware.

In closing, the article started out as a comparison between two different business models, brokering and banking. My summation was that the argument is full of bathos and really it comes down to who you choose to work with over the business model you choose. If you want to take a narrowly focused article on that distinction and turn it in to a bombastic rant against the entire lending industry I'm all for it! Hell if you want to blow up the whole industry and start over I'm all ears. Visit my blog blownmortgage.com - that's all we talk about there - how messed up this industry truly is - but to simply spin off of this piece in an attempt to deride the entire industry is not productive because 1. I agree and 2. that's not the topic of this piece.

Sorry but I must disagree vehemently again with you, since you are now throwing common sense out the window altogether. Let me quote some of what you said and respond.

"Who says barbers don't just churn out as many haircuts as they can per hour to maximize their personal gain? What if my personal opinion is that most hair dressers or barbers don't listen to you, don't pay attention to your requests and generally give lousy service?"

Are you serious? Those are two sophormic statements that I am surprised you could even come up with. If any barber did not perform well and gave out bad haircuts and service, they wouldn't get the repeat business they need and would soon be looking for new work.

"Second - the dollar amount collected for the transaction has nothing to do with honesty or hard work or "what they deserve." The market for their services sets their level of compensation. Nothing else."

What the service someone provides has everything to do what with what they deserve to get paid. This is especially true when the service is readily available, easy to obtain and the provider does not need a great deal of knowledge, training or education. Quit elevating what you do as something that is special or difficult to perform. I find it ludicrous to call something hard work and honest when the service does not warrant the fees being paid and is far from actual hard work.

"Stock brokering, insurance, banking, real estate, all have similar (or larger) commission structures. Unless you deride all people that make money from these types of transactions, then I can't argue with you"

I'm glad to see you lumped what you do in with a couple of other shady occupations such as stock brokers and real estate agents. These are two other vocations that are also lowly regarded, have scammed a lot of customers over the years and have had numerous complaints filed against them.

"By the way - what would you think someone handling close to 250,000 - 500,000+ dollars per transaction should be paid?"

Another fallacy loan sellers like to perpetrate - implying the size of the loan relates to the difficulty and the fees that should be charged. Why don't you admit that most conforming/conventional loans are fast and easy to do and even larger loans with some credit problems are still not that difficult.

Why not compare getting a home loan to what an insurance agent does to get a family a $500,000 20 year term life insurance policy? Don't you think this person works just as hard to get the sale and puts in just as much effort and time for what they get paid as you do?

The only difference is the agent makes around $300 to $500 on that $500,000 policy but you loan sellers think you deserve to make $3000 and up on a $250,000 home loan. Get real. There are a lot of businesses where the compensation is highly inflated and selling home loans should be at the top of the list. Disagree if you will, but as consumers get better informed, many of you will need to face the reality of what you do is no more difficult or important as the insurance agent that sold the $500,000 life policy.

In closing, I would like to see more debates like this on public forums across the internet. And if this happens, who do you think the public is going to side in with? Not a difficult question to answer, now is it?

I don't know how you vehemently oppose "blowing up the whole industry and start[ing] over" but I digress in to what will probably be my last comment on this subject, as you have clearly chosen to make this post a pulpit for a spouting your general, poorly-reasoned anger against the industry. And while I share your anger at the industry (you'd know this if you visited my blog, blownmortgage.com) I am not inclined to engage in a debate where your arguments are quickly slipping towards those of personal attacks and digs in the comments of a post where the topic was a narrowly defined comparison of brokers vs. banking business models. A topic which you have bastardized by 1. choosing this post as a launching point for poorly directed anger and 2. choosing not to discuss the merits of the business models discussed in the original post.

And while I take issue with most of your comments this one is by far the most disturbing:

What the service someone provides has everything to do what with what they deserve to get paid. This is especially true when the service is readily available, easy to obtain and the provider does not need a great deal of knowledge, training or education.

This shows such a poor understanding of capitalism and our economy that I don't know where to start. No where in economic texts on capitalism as an economic theory or practice rely on "what people deserve" as a form of compensation. Capitalism is based on what the market sets as the price of a service based on competition within the context of supply and demand. No where does "what you [or I or anyone] deserve" to make play any role in it - zero.

If people got "what they deserve" in terms of the value they provide to society policemen, firemen and teachers would be paid much, much more than they are paid now. Deserving does not factor in to the economic equation of capitalism at all.

The only economic theory where "deserve" plays a role is arguably communism - where everyone deserves equal compensation, regardless of occupation.

This idea that people "deserve" some level of compensation based on your own contrived opinions of worth - which is the lynch pin of your entire argument - is completely invalid within the context of a free-market economy - it's not how the economy works, and your admonishment to the contrary shows your lack of understanding in this regard.

In my first rebuttal you ignored my question as to who gets to decide who deserves what when it comes to compensation. Why? Because obviously there is no one to set that subjective and impossible-to-define standard. Why? Because it is irrelevant as a measure in our economy.

Again - the rest of your argument is clearly steeped in personal opinion of which you provide no firm evidence or information other than what you "believe." Your opinion (and others similar in idea) I believe are the prevailing opinion(s) that got most Americans in to the mess we are currently in.

I am sure you'll choose to take the last word - which I am happy to grant you - but after that I am done discussing problems about the way the market for mortgages is run (which again, I emphatically agree there are major problems) in this thread which is not about this problem; surely there are better, actually relevant topics on which to choose to continue this debate.

There have been many blogs on this subject. It really does not make a difference who a borrower should use. As long as the loan officer is a trained professional who treats his client the best he/she can is all that matters.

I read a comment above that stated "anybody can write a mortgage" well anyone can fly the space shuttle too. They just have to be trained.

This will be my last post on this so you or anyone else can get in the last word. What I say here doesn't matter that much as this is a forum inhabited by people who take a blind eye to what's really going on and are a part of the problem as well.

Your defense for the excessive fees charged borrowers to get a home loan is once again severely lacking. Praising capitalism as the engine that determines what is fair and what is not is ludicrous. Capitalism is often just another word for greed and often leads to destructive practices such as those that are now inflicting home owners across the nation. Wise up and smell the roses. Just because you live in a capitalistic society doesn't make it the best system to always operate under.

Let me address your comment - "In my first rebuttal you ignored my question as to who gets to decide who deserves what when it comes to compensation. Why? Because obviously there is no one to set that subjective and impossible-to-define standard. Why? Because it is irrelevant as a measure in our economy."

I explained distinctly that what you do is no more complicated, time consuming or difficult than someone that sells a $500,000 life insurance policy that makes several hundred dollars for their efforts. Just because your industry as a whole continues to con the public into thinking they should pay many times more than your service is worth does not justify it. You operate under the premise of charging whatever the market will bear instead of what should be reasonable.

I agree that firemen and police officers are often underpaid for the jobs they do but I wouldn't multiple their incomes by 5 to 10 times what they are currently making and that is exactly what happens when someone makes $5,000 or more on a $400,000 home loan. This is the basis of my comments which you have ignored and failed to directly respond to.

I will end this by saying you never did provide a direct explanation as to why someone should pay so much to get a home loan. You diverted and skirted the issue and rambled on because you really can't defend your fees. Once people understand they don't need to line your pockets with their money as they have been, the party will be over. Forces are already in motion and for many of you, your days are numbered.

I just want to close with saying (as I've now said for the third time) that I agree 100% with you that the system is broken, that consumers get screwed repeatedly, and that something should be done to make it easier for consumers to protect their best interests - I only had a problem with your argument as it was based on a concept of "deserving" which doesn't fit with our reality - the fix has to be something more.

I have written numerous articles for consumers on NOT paying excessive fees - that have made many in my industry angry at pulling back the curtain, here are a few:

So in the end we agree that fees are exorbitant; I just disagree that there is some "deserved" level of compensation that should be set by who knows, and that it should be (and is currently) being borne out by the markets (and or via government regulation).

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